Save this document

CONSOL Energy Inc. (NYSE: CNX) announced several updates in connection with its participation in the Barclays CEO Energy-Power Conference in New York.

First, in order to provide better clarity and visibility to the market with respect to the company achieving its strategic goal of separating its coal and E&P businesses, the company intends to execute the spin-off transaction at the earliest possible time, which is expected to be in the fourth quarter of 2017.

Second, CONSOL Energy is decreasing its 2017 E&P Division production guidance to approximately 405-415 Bcfe, compared to the previously stated guidance of 420-440 Bcfe. For the third quarter of 2017, the company expects production of approximately 100 Bcfe, which implies higher growth in the fourth quarter, driven in part by the well turn-in-line (TIL) schedule peaking in November. The company maintains previously announced 2017 total E&P capital expenditures guidance of approximately $620-$645 million. Also, the company maintains the previously announced 2018 E&P Division production guidance of approximately 520-550 Bcfe, or approximately 30% growth compared to 2017 based on the midpoint of the guidance ranges.

The decrease in 2017 production volumes is due to larger ceramic completion designs increasing cycle times, operational issues, and a tightening in the availability of field services. These issues have added complexity and delayed several TILs in 2017. However, the issues are transitory, and 2018 volumes will not be impacted. In accordance with its NAV-driven philosophy, the company determined not to sacrifice value solely to achieve 2017 production within its previously announced guidance.

Third, for the Pennsylvania Mining Complex, the company is decreasing guidance for 2017 adjusted EBITDA attributable to CONSOL Energy to $345 million, which is a decrease of $25 million from previously stated guidance. The decrease is due to a reduction in coal price realizations resulting from cooler than normal summer, modest delivery impacts related to the railroads, and a one week longwall permit delay. However, through optimization initiatives, the company expects total consolidated coal capital expenditures to decrease to $112-$120 million, which is a reduction from the previously stated guidance of $120-$136 million.

As of midnight last night, the Pennsylvania Department of Environmental Protection (DEP) has sought more time to review the technical merits of the permit submittal for continued longwall mining in the 4L panel at the company's Bailey Mine, in light of a recent Environmental Hearing Board decision. As a result, the longwall has been idled and workforce adjustments are being made. This is the first time in the 35-year history of the Bailey Mine that the company has failed to timely receive a needed mining permit. The company maintains that this permit meets the necessary criteria for approval, and the company is in ongoing communication with Pennsylvania Governor Wolf's office and the Secretary of the DEP asking that the permit be issued in order to enable the company to get its miners back to work and resume production. CONSOL will lose approximately 25,000 tons of production per day as a result of this permit delay. While the company can make up some lost production in the fourth quarter, if the permit is not issued in the near future, additional layoffs will be likely and the impact on the company could be material. The EBITDA guidance provided above assumes that the permit is issued in the near future. The company hopes that the DEP resolves this matter quickly, and the company will provide updates as new information becomes available.

The company now expects full year 2017 adjusted EBITDA guidance to be approximately $815 million, which is a decrease of $55 million from the previously stated guidance. Also, the company now expects 2017 leverage to be approximately 2.8x net debt to EBITDA, which is an increase of 0.2x from previously stated guidance.

Finally, as stated in the previous quarter's earnings call, CONSOL has continued to sell non-core assets, and since August 1, 2017, the company has closed on an additional $40 million, which includes the sale of non-core Marcellus Shale acres in Allegheny and Westmoreland counties, Pennsylvania, for approximately $30 million, discussed on the previous quarter's earnings call. Therefore, year-to-date, the company has closed on $385 million of asset sales. In addition, the company has entered into a contract to sell a large block of surface acreage for approximately $25 million, which the company expects to close early in the fourth quarter. Once closed, asset sales will total approximately $410 million.

Share Repurchase Program
CONSOL Energy's Board of Directors has approved a one-year share repurchase program of up to $200 million. The repurchases will be effected from time-to-time through open market purchases, privately negotiated transactions, Rule 10b5-1 plans, accelerated stock repurchases, block trades, derivative contracts or otherwise in compliance with Rule 10b-18. The timing of any repurchases will be based on a number of factors, including available liquidity, the company's stock price, the company's financial outlook, and alternative investment options. The share repurchase program does not obligate the company to repurchase any dollar amount or number of shares and the Board's authorization of the program may be modified, suspended or discontinued at any time. The Board of Directors will continue to evaluate the size of the stock repurchase program based on CONSOL's free cash flow position, leverage ratio, and capital plans.

Barclays CEO Energy-Power Conference Participation and Presentation
CONSOL Energy's President and Chief Executive Officer, Nicholas J. DeIuliis will meet with investors and present today, September 5, 2017, at 2:25 pm ET at the Barclay's 2017 CEO Energy-Power Conference. The presentation materials will be available on the company's website at 6:45am ET. Also, the live webcast will be available on CONSOL Energy's website at www.consolenergy.com, and the replay will be archived there as well.

Note: CONSOL Energy is unable to provide a reconciliation of projected Adjusted EBITDA to projected operating income, the most comparable financial measure calculated in accordance with GAAP, due to the unknown effect, timing and potential significance of certain income statement items. EBITDA guidance based on the midpoint of production guidance.

About CONSOL Energy
CONSOL Energy Inc. (NYSE: CNX) is a Pittsburgh-based energy producer, and one of the largest independent natural gas exploration, development and production companies, with operations centered in the major shale formations of the Appalachian basin. The company deploys an organic growth strategy focused on developing its substantial resource base. As of December 31, 2016, CONSOL Energy had 6.3 trillion cubic feet equivalent of proved natural gas reserves. CONSOL Energy is a member of the Standard & Poor's Midcap 400 Index. Additional information may be found at www.consolenergy.com.

Cautionary StatementsVarious statements in this release, including those that express a belief, expectation or intention, may be considered forward-looking statements under federal securities laws including Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act") that involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward looking statements as a prediction of actual results. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. When we use the words "believe," "intend," "expect," "may," "should," "anticipate," "could," "estimate," "plan," "predict," "project," "will," or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this press release, if any, speak only as of the date of this press release; we disclaim any obligation to update these statements. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following: uncertainties as to the timing and manner of the separation (whether by sale or spin-off) and whether it will be completed (including any dropdowns of the coal business); the possibility that various closing conditions for the separation may not be satisfied; the impact of the separation on our business; the expected tax treatment of the separation; the risk that the coal and natural gas exploration and production businesses will not be separated successfully or such separation may be more difficult, time-consuming or costly than expected, which could result in additional demands on our resources, systems, procedures and controls, disruption of our ongoing business and diversion of management's attention from other business concerns; competitive responses to the separation; deterioration in economic conditions in any of the industries in which our customers operate may decrease demand for our products, impair our ability to collect customer receivables and impair our ability to access capital; prices for natural gas, natural gas and other liquids and coal are volatile and can fluctuate widely based upon a number of factors beyond our control including oversupply relative to the demand available for our products, weather and the price and availability of alternative fuels; an extended decline in the prices we receive for our natural gas, natural gas liquids and coal affecting our operating results and cash flows; foreign currency fluctuations could adversely affect the competitiveness of our coal and natural gas liquids abroad; our customers extending existing contracts or entering into new long-term contracts for coal on favorable terms; our reliance on major customers; our inability to collect payments from customers if their creditworthiness declines or if they fail to honor their contracts; the disruption of rail, barge, gathering, processing and transportation facilities and other systems that deliver our natural gas, natural gas liquids and coal to market; a loss of our competitive position because of the competitive nature of the natural gas and coal industries, or a loss of our competitive position because of overcapacity in these industries impairing our profitability; coal users switching to other fuels in order to comply with various environmental standards related to coal combustion emissions; the impact of potential, as well as any adopted environmental regulations including any relating to greenhouse gas emissions on our operating costs as well as on the market for natural gas and coal and for our securities; the risks inherent in natural gas and coal operations, including our reliance upon third party contractors, being subject to unexpected disruptions, including geological conditions, equipment failure, timing of completion of significant construction or repair of equipment, fires, explosions, accidents and weather conditions which could impact financial results; decreases in the availability of, or increases in, the price of commodities or capital equipment used in our mining and transportation operations; obtaining and renewing governmental permits and approvals for our natural gas and coal operations; the effects of government regulation on the discharge into the water or air, and the disposal and clean-up of, hazardous substances and wastes generated during our natural gas and coal operations; our ability to find adequate water sources for our use in natural gas drilling, or our ability to dispose of water used or removed from strata in connection with our natural gas operations at a reasonable cost and within applicable environmental rules; the effects of stringent federal and state employee health and safety regulations, including the ability of regulators to shut down our operations; the potential for liabilities arising from environmental contamination or alleged environmental contamination in connection with our past or current natural gas and coal operations; the effects of mine closing, reclamation, gas well closing and certain other liabilities; uncertainties in estimating our economically recoverable natural gas, oil and coal reserves; defects may exist in our chain of title and we may incur additional costs associated with perfecting title for natural gas and coal rights on some of our properties or failing to acquire these additional rights may result in a reduction of our estimated reserves; the outcomes of various legal proceedings, which are more fully described in our reports filed under the Securities Exchange Act of 1934; exposure to employee-related long-term liabilities; acquisitions and divestitures we anticipate may not occur or produce anticipated benefits; our participation in joint ventures may restrict our operational and corporate flexibility, and actions taken by a joint venture partner may impact our financial position and operational results; risks associated with our debt; replacing our natural gas and oil reserves, which if not replaced, will cause our natural gas and oil reserves and production to decline; declines in our borrowing base could occur for a variety of reasons, including lower natural gas or oil prices, declines in natural gas and oil proved reserves, and lending regulations requirements or regulations; our hedging activities may prevent us from benefiting from near-term price increases and may expose us to other risks; changes in federal or state income tax laws, particularly in the area of percentage depletion and intangible drilling costs, could cause our financial position and profitability to deteriorate; failure to appropriately allocate capital and other resources among our strategic opportunities may adversely affect our financial condition; failure by Murray Energy to satisfy liabilities it acquired from us, or failure to perform its obligations under various arrangements, which we guaranteed, could materially or adversely affect our results of operations, financial position, and cash flows; information theft, data corruption, operational disruption and/or financial loss resulting from a terrorist attack or cyber incident; operating in a single geographic area; certain provisions in our multi-year coal sales contracts may provide limited protection during adverse economic conditions, and may result in economic penalties or permit the customer to terminate the contract; a majority of our common units in CNX Coal Resources LP and CONE Midstream Partners LP are subordinated, and we may not receive distributions from CNX Coal Resources LP or CONE Midstream Partners LP; with respect to the sale of the Buchanan and Amonate mines and other coal assets to Coronado IV LLC - disruption to our business, including customer, employee and supplier relationships resulting from this transaction, and the impact of the transaction on our future operating results; with respect to the termination of the joint venture with Noble - disruption to our business, including customer and supplier relationships resulting from this transaction, and the impact of the transaction on our future operating and financial results and liquidity; other factors discussed in the 2016 Form 10-K under "Risk Factors," as updated by any subsequent Form 10-Qs, which are on file at the Securities and Exchange Commission. We disclaim any obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law.